EPR Properties Announces Comprehensive Restructuring Agreement and Master Lease with Regal Cinemas; Management to Host Conference Call

EPR Properties (NYSE:EPR) (the “Company”) today announced that it has entered into a comprehensive restructuring agreement with Regal Cinemas and certain of its subsidiaries (collectively, “Regal”) anchored by a new master lease (“Master Lease”) for 41 of the 57 properties currently leased to Regal (“Master Lease Properties”).

The Master Lease is a triple-net lease with $65 million in total annual fixed rent (“Annual Base Rent”) escalating by 10% every five years. The Master Lease has three tranches of properties. The initial terms of the tranches are staggered, expiring on the 11th, 13th and 15th anniversaries of the Effective Date (as defined herein), respectively, and each tranche has three five-year renewal options. The weighted average lease term was increased by four years to 13 years.

Regal will also pay percentage rent for each lease year (“Annual Percentage Rent”) on gross sales exceeding $220 million, with threshold amounts increasing every five years commensurate with escalations in Annual Base Rent. Regal revenues on the 41 Master Lease Properties exceeded $220 million in 2022 as North American Box Office Gross (“NABOG”) totaled $7.4 billion.

The Company will also reduce its footprint with Regal by taking back 16 theatres previously operated by Regal (the “Surrendered Properties”).

• Pursuant to management agreements, Cinemark (NYSE:CNK) will operate four of the Surrendered Properties and Phoenix Theatres will operate one.
• As part of the Company’s strategy to reduce its overall theatre footprint, the remaining 11 theatres will be marketed for sale.

Percentage rent under the Master Lease was designed to allow the Company to participate in expected continued improvements in box office performance, and to provide for income to return to pre-pandemic levels as performance recovers.

For the initial lease year ending in 2024, assuming NABOG approximates $9.4 billion, the combined 41 Master Lease Properties and five operating properties are expected to achieve 96% of the aggregate pre-bankruptcy Regal rent for the 57 properties. The median industry analyst estimate of NABOG for 2023 is $9.0 billion and is $9.8 billion for 2024.

As previously disclosed, on September 7, 2022, Cineworld Group, plc and Regal, and certain of their subsidiaries (collectively, “Debtor”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code. On June 28, 2023, a hearing was held in the case regarding the confirmation of the Debtor’s Plan of Reorganization (the “Plan”). Debtor has recently stated that it is seeking confirmation of the Plan on an expeditious basis and reiterated its expectation that it will emerge from the Chapter 11 cases in July 2023. As a result of the reorganization, it is expected that Debtor’s total debt would be reduced from $5.0 billion owed prior to the bankruptcy, to only $1.5 billion upon effectiveness of the Plan.